Euro zone PMIs shrug off political worries

Tuesday, February 21, 2017 - 01:47

Eurozone private sector and manufacturing growth unexpectedly accelerated to near a six-year high in February and job creation reached its fastest since August 2007. As David Pollard reports, it was propelled by strong demand and optimism about the future despite big political risks.

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Politics Parisian style ...
Voters already sounding off over issues ahead of this year's presidential election.
Though right now a French economy simmering along nicely isn't one of them.
(SOUNDBITE) (English) FIDELITY INTERNATIONAL, INVESTMENT DIRECTOR, TOM STEVENSON, SAYING:
"The growth outlook is getting progressively better on many different fronts and today's PMI figures were an illustration of that ... Despite all the political concerns in Europe, the underlying growth story is pretty strong."
The euro zone improving at its strongest in nearly six years, according to readings for this month.
The composite PMI now six points clear of the 50 level that denotes growth.
The employment reading at its best in more than nine years.
French services leapt to 56.7 despite expectations for a fall.
And German manufacturing hit 57.0 - also the highest in over half a decade.
(SOUNDBITE) (English) FIDELITY INTERNATIONAL, INVESTMENT DIRECTOR, TOM STEVENSON, SAYING:
"Germany as we know has a very strong manufacturing sector and it benefits from growth in the external world outside the euro zone - but also an improvement in conditions inside the euro zone."
But the surveys also see inflation risk in the sharpest increase in German input and output prices since mid 2011.
And with a full diary of European elections this year, politics may yet pack their punch.
(SOUNDBITE) (English) FIDELITY INTERNATIONAL, INVESTMENT DIRECTOR, TOM STEVENSON, SAYING:
"Unexpected, untoward political events are the biggest risk affecting investors at the moment."
New ECB data show euro zone investors taking money abroad despite the recovery.
Investment fund holdings inside the bloc now only just more than those outside - when in 2008, they were almost double - as, apparently, caution creeps in.

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